A CALL TO OPTIMIZE THE CONSTITUENCY DEVELOPMENT FUND (CDF) MANAGEMENT

The Constituency Development Fund (CDF) is a transformative force that promises to uplift the lives of many people out of poverty, particularly those at the lower end of the socioeconomic spectrum. This is because it is remedying the problems of access to basic services, education and employment opportunities which all serve to perpetuate poverty.

As a legacy of the colonialism, significant development has been concentrating in cities and urban areas along the railway line stretching from Livingstone through Lusaka to the Copperbelt. Conversely, rural areas have witnessed limited participation in economic advancement. To address this disparity, successive governments have prioritized devolution as a fundamental aspect of their governance strategy. The objective is to cater to the specific needs and priorities of local communities by allocating funds for infrastructure development, social services, education, healthcare, water and sanitation, agriculture, and various other sectors. This is where CDF becomes pivotal as the aim of this fund is to promote citizen participation and engagement in decision-making processes concerning local development initiatives.

However, implementation has always presented challenges. To break free from this cycle and demonstrate their dedication to enhancing devolution, the UPND-led administration has increased allocations since their inaugural budget presentation from K1.6 million to K25.7 million in 2022 and to now K28.3 million. By the next election, constituencies will have received north of K140 million. This is a lot of money that should not only acceleration the wheels of the economy but also improve on human development and dignity by supporting community projects across all the 156 constituencies.

Around the world, CDF is being used to prevent the arbitrary exercise of power by central elites and to improve the effectiveness of social service delivery. Various countries such as Kenya, South Sudan, the Philippines, Honduras, Nepal, Pakistan, Jamaica, Solomon Islands, Tanzania, Malawi, Namibia, Zambia, Uganda, Ghana, and Malaysia have adopted and are implementing their own versions of the CDF or similar programs. Zambia has taken huge steps on this by the launch of the decentralization policy and the commissioning of US$210 million Zambia Devolution Support Programme by President Hakainde Hichilema in May 2023.

In this article, I shall refrain from delving extensively into the challenges pertaining to the alignment of the CDF Guidelines and CDF Act, as well as the delegation of additional responsibilities from Lusaka to the districts. The reason for this omission is that the government has already acknowledged these challenges and is currently devising mechanisms to facilitate the necessary realignment. I will look at why there is need to urgently and deliberately introduce private sector led CDF management and remove certain functions from the fund.

INCORPORATING THE PRIVATE SECTOR IN FUND MANAGEMENT IS IMPERATIVE.

The government should contemplate the involvement of private fund managers in overseeing the management of CDF. The fund manager can receive compensation of 5% operation cost provided for in the CDF Guidelines, which amounts to approximately K1.5 million. Most importantly, considering that numerous districts have multiple constituencies, the inclusion of Fund Management would also contribute to job creation and stimulate economic growth.

Here is a breakdown of the rationale behind my proposal.

Firstly, at the core of their operational procedures, Fund Managers prioritize value for money and a good return on investment as they need to demonstrate their relevance. Their effectiveness in managing funds proves to be an efficient and fruitful approach, surpassing traditional activity-based funding. By partnering with technically proficient and reliable fund managers, optimal utilization of public funds can be ensured, leading to successful project implementation and collaborative attainment of development goals alongside responding to beneficiaries’ needs. This aligns with the objectives of Vision 2030 and the 8th National Development Plan (8NDP).

Furthermore, it is crucial to acknowledge that achieving national developmental goals requires innovative approaches that leverage private sector capacities, while fostering economic growth and development. Sustained development in the long run demands a departure from traditional government funding models, envisioning a future where the private sector plays a pivotal role. Without such efforts, there remains a significant disparity between the needs of the local communities and the current allocation of the CDF.

Thirdly, fund managers bring their expertise to the table by identifying viable investment opportunities, effectively controlling and monitoring risks. They can make investment decisions based on the fund's objectives, investment guidelines, and the risk tolerance of the investors. In addition to managing the CDF, fund managers can handle administrative tasks such as accounting, reporting, and compliance with CDF regulations.

The inclusion of fund managers in CDF project management also provides multiple benefits to the government. Firstly, it relieves the burden on Local Authority personnel, allowing them to focus on their other responsibilities, while also creating employment opportunities for graduates and addressing high unemployment rates. The private sector's dynamic nature and responsiveness to market demands make it more effective at generating employment. Secondly, fund managers have the potential to generate tax revenue through corporate taxes and employee income taxes, providing vital funding for the CDF. Additionally, their involvement can drive innovation and technological advancements through research and development, fostering productivity and competitiveness in the economy. These strategic benefits contribute to more efficient CDF project management and hold the potential to positively impact the country's socioeconomic development. 

GRANTING LOANS AND PROVIDING GRANTS SHOULD REMAIN WITH THE CITIZENS ECONOMIC EMPOWERMENT COMMISSION (CEEC).

As proposed by the Private Sector Developmental Association (PSDA) Chairperson, Yusuf Dodia, CDF should not be channeled towards the empowerment of small-scale businesses. It is imperative to allocate CDF resources exclusively for developmental projects in constituencies. It is essential to emphasize the clarity of the matter at hand: the allocation of 20% of CDF specifically designated for Youth and Women Empowerment, consisting of 40% in grants and 60% in soft loans is misguided.

Maybe this allocation is warranted due to the existing challenges faced by the Citizens Economic Empowerment Commission (CEEC). The commission requires significant reforms as it is currently grappling with numerous internal and external obstacles. These challenges include inadequate financial resources, insufficient office space, a shortage of personnel, non-repayment of loans by micro, small, and medium-sized enterprises (MSMEs), lack of autonomy, absence of CEEC officials at the district level, problematic appointments of CEEC officials, and political interference. These hurdles hinder the commission's ability to efficiently and effectively carry out its responsibilities.

To address these issues, the commission should be perceived as an independent and competent body that actively promotes the empowerment of marginalized or disadvantaged citizens. These measures will help the commission operate more effectively in its mission of economic empowerment. And more importantly, the commission can effectively take on the financing of SMEs, that will also benefit from CDF through contracts. It is a great positive-sum game. Its primary goal should be to address the constraints faced by SMES in accessing economic resources and developing their capacity for growth, all while mitigating various factors that have hindered their progress. Besides, there is an entire ministry for SMEs.

It is disheartening to hear stories of community members forming groups with the sole intention of obtaining CDF loans or grants, only to later misuse the funds by distributing cash among themselves.

CONCLUSION

In conclusion, allocating K28.3 million to an agency which had previously struggled with managing K1.6 million just sets them up for failure. This also contributes to project implementation delays and potential neglect of other mandates by the Local Authority staff to solely focus on CDF projects which have more political pressure. However, although on paper there is a minimal role of Members of Parliament (MPs) in the implementation of the fund at the constituency level, providing for the constitution of local committees by citizens themselves, MPs still return a greater influence on who gets to be in the CDF committees and which projects gets prioritized due to the lack of safeguards.